What can emerging ecosystems learn from the growth journey of Silicon Valley, London, or Tel Aviv?

Building tech ecosystems is crucial for ensuring economic sovereignty in the future, but they do not grow by chance. It is essential for anyone aiming to nurture a city into a global tech hub to understand not only the factors at play in ecosystem development but also the stages through which tech ecosystems evolve.

But first, we need to take a step back and define what tech ecosystems are; namely, networks of companies, entrepreneurs, policymakers, and investors; or more abstractly of capital, talent, infrastructure, and policy.

What are Tech Ecosystems?

It is immensely valuable to ecosystem builders and participants to understand the ecosystem lifecycle and their ecosystem’s progress in it, to determine which metrics to measure success by and which comparable ecosystems to benchmark against or learn from.

This article outlines a framework for tech ecosystem development along five distinct stages. Think of it as a progression from humble beginnings to global prominence, where each stage demands different resources, policies, and success markers. Advancing through those stages is no straightforward process. While many will ascend the ladder, some ecosystems contract again or are revitalised at a later point.

The proposed mental model can be applied to cities, regions, or countries. In this article, we will focus on its application to city-level ecosystems. Ultimately, it is about providing ecosystem builders and policymakers with the right analytical tools to nurture tech ecosystems with the appropriate policy environment at each stage. If you are interested in how your ecosystem fits into the lifecycle, reach out to [email protected].

Stage 1: Nascent Ecosystem

Before an ecosystem comes into existence, the tech landscape may be characterised by a few startups built by an initial cohort of credible founders. To share knowledge and expertise, founders may organise early meetups or first accelerators. This nascent ecosystem has VC activity in Seed to Early Stage, but little capital availability beyond. At this stage, an ecosystem is by no means self-sufficient, and policy ideas that encourage experimentation and nurture small companies are crucial.

Stage 2: Emerging Ecosystem

The birth of an ecosystem is usually characterised by a few breakout successes that catalyse further development. These include the first $100M+ exits, unicorns, and increasing levels of funding activity (~$100M raised across at least 50 rounds over 5 years). Large exits are crucial to equip early founders with capital to either start new ventures or become investors and supply the next generation of entrepreneurs with capital and know-how. Outside investors are now increasingly taking notice. There may be dozens to hundreds of startups by this stage. 

These ecosystems are now tracked among the 288 cities of the Dealroom Global Tech Ecosystem Index, quite literally putting them on the global map. However, lingering challenges remain: strong leakages of talent and companies to global hubs and still limited breakout and scaleup capital. As local startups start to scale, operative talent (sales, product, hiring) starts to matter more than pure ideation. An ecosystem’s success here starts to depend more on the local talent pipeline, e.g. coming from universities.

Stage 3: Growth Ecosystem

In the breakout stage, an ecosystem has hundreds of startups, many emerging from startup mafias (alumni networks of employees from successful startups who go on to found or invest in new ventures). Some companies reach multi-billion-dollar valuations, bringing total ecosystem value beyond $20B. Corporates take notice and partner with local startups, and the hub becomes attractive to some foreign talent, while overall talent outflows still exceed inflows. 

With increasing participation of foreign investors, breakout capital becomes more widely available, while scaleup/late-stage financing can still be a challenge. These hubs raise at least 100 rounds totalling $1B over 5 years. With the ecosystem beginning to pull resources globally, specialisation patterns emerge. While many sectors are present, some become more globally competitive. Clear sector branding at this stage can help draw external talent and companies. There are around 150 Breakout Ecosystems in the world.

Stage 4: Mature Ecosystem

In the scaleup stage, the collaboration between startups, universities, corporates, and government starts to accelerate the tech ecosystem flywheel. Thousands of startups are able to tap into capital along the entire VC funding cycle, including late-stage, with VC investment reaching $2B over 5 years. The ecosystem becomes more self-sustaining: repeat founders, experienced operators, and local investors recycle knowledge and capital into the next generation. 

While multiple tech sectors are maturing in some ecosystems, in others, local identity and specialisation sharpen. These ecosystems often brand themselves around one or two frontier technologies. For many mid-sized cities, this can be a winning configuration in itself: rather than aiming to become a global leader across the board, they achieve global relevance by focusing on a specific industry, such as semiconductors in Eindhoven, robotics in Pittsburgh, or AI in Zurich.  Whether sector-focused or diversified, mature ecosystems have several thoroughbreds ($100M+ revenue) and, in some cases, decacorns ($10B+ valuation). At this stage, total ecosystem value reaches $50B+. There are around 50 mature ecosystems worldwide.

Stage 5: Global Leader Ecosystem

These are the world’s top 10-20 ecosystems. They are home to tech companies with global reach, of which several are decacorns ($10B+) and some centacorns ($100B+). Subsequently, enterprise value starts to concentrate in these larger companies, while the tech industry takes a substantial share in the local economy. 

Global Leader hubs have considerable capital available at all stages of the funding cycle. They are competing for frontier tech talent with other leader hubs. This stage is, however, not without its challenges. Rising cost of living and housing prices may lower the hub’s appeal, while nascent startups may suffer from fierce competition with established players.

Self Renewal or Decline

It is important to restate here that a single ecosystem’s development may not advance through these stages in a linear manner. At each level, it may move to the next stage or contract due to financial or policy challenges. As ecosystems mature, the number and diversity of stakeholders multiply (from startups and investors to corporates, universities, and local residents). Aligning these groups around continued growth becomes a leadership challenge in its own right. Ecosystem builders must be aware of both risks they can address (e.g. overheating wages/housing, capital concentration in a few companies, talent flight, anti-business policy environment) and those out of their control (tech sovereignty and associated geopolitical risks).

At the same time, successful renewal is possible for declining ecosystems, e.g. through new technology waves, recycling of talent/capital, and/or institutional adaptability. The question remains whether an ecosystem can advance to the next stage.

At Dealroom.co, we are building the intelligence layer for tech ecosystems. If you are interested in how we can help measure your ecosystem, send an email to [email protected]. For further reading on tech ecosystems, check out our Global Tech Ecosystem Index 2025, where we benchmark 288 cities around the world.